UPDATE 2-Arch Coal profit jumps on strong global demand

(Adds analyst comments, background, stock rise, byline)

By Steve James

NEW YORK, April 21 (Reuters) - Arch Coal Inc (ACI.N) said on Monday first-quarter profit almost tripled as strong global demand, especially from Asia, helped double the price of coal over the past year.

The results easily beat Wall Street estimates, and the company raised its full-year earnings forecast, helping drive up Arch shares nearly 7 percent.

"They had a nice earnings beat," said analyst Jeremy Sussman of Natixis Bleichroeder. "I think Arch's numbers could have positive implications for others." Two other big U.S. coal companies, Peabody Energy (BTU.N) and Massey Energy (MEE.N), report first-quarter results this week.

Sussman said it was significant that Arch had locked in orders for almost 10 million tons of coal this year and next at sky-high prices.

"The prices across the board are pretty fantastic," he said. Arch did not specify the prices, but based on company statements, Sussman calculated Arch would get $85 per ton for Central Appalachian coal, over $100 per ton for metallurgical coal, which is used in steel-making, and around $17 per ton for coal from the Powder River Basin of Montana and Wyoming.

A ton of eastern U.S. coal that sold for $44.75 last April is now selling for $85.50. Powder River Basin coal has risen from $8 per ton to $15 in the last 12 months, according to the industry newsletter Coal & Energy Price Report.

"We've been successful in locking up a substantial portion of our metallurgical and steam coal sales opportunities in Central Appalachia given the strong pricing environment," said John Eaves, Arch's president and chief operating officer.

"We've also strategically chosen to leave a small portion unhedged in 2008 -- and substantially more unpriced in 2009, including most of our metallurgical-quality coal -- to capitalize on continued pricing strength."

Arch said pricing for international metallurgical coal and steam coal has been robust this year and has boosted pricing in domestic coal markets.

Recent metallurgical coal sales have approached the benchmark prices set in the Asian market, where industrial growth in China is driving demand for steel, the company said.

Arch said it estimates that global coal demand will outstrip supply by 25 million to 35 million metric tonnes, and it expects this supply deficit to grow through 2010.

Continued strength in the international coal marketplace is positively influencing domestic coal markets. Arch estimates that U.S. coal imports could decline as much as 10 million tons this year due to supply disruptions and increased competition for coal.

The company expects U.S. coal exports in 2008 to increase by 20 million tons over last year's strong market levels.

St. Louis-based Arch said first-quarter net earnings were $81.1 million, or 56 cents per share, compared with $28.7 million, or 20 cents per share, a year earlier. Revenue jumped 22 percent to $699.4 million.